More than half of global institutional investors are worried about the ongoing effects geopolitical risk (55 per cent) and rising inflation (53 per cent) will have on their portfolios, according to a new survey by Schroders.
The survey, which polled 770 global institutional investors representing US$34.7 trillion in assets, found that, in order to combat geopolitical risk, respondents said they’re specifically targeting companies in the public and private markets with local supply chains.
In a press release, Nils Rode, chief investment officer at Schroders Capital, said the leading concerns in the survey have shaken institutional investors’ confidence. “We think investors are right to exercise caution, but should also view this disruptive environment not as merely a temporary phase but the emergence of a new era altogether.”
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Over the next two years, 35 per cent of institutional investors said they plan to increase their allocations to private assets, since they can provide a deeper source of diversification. The attraction to private assets is proof of the resilience they bring to portfolios, said Rode.
“The study found that institutional investors’ allocations to equities may increase as they look to capitalize on the opportunities presented by the deglobalization, decarbonization and demographic trends,” said Johanna Kyrklund, group chief investment officer and co-head of investment at Schroders, in the release.
The survey found around 21 per cent of institutional investors said they have no plans to set net-zero targets for their portfolios. Among investors that declined to make a commitment, 44 per cent were based in the U.S.
In addition, 67 per cent of respondents said they believe the energy transition category will offer significant investment opportunities.
“Thematically, investors are aware that private assets are plugged directly into durable trends of disruption and progress that will be catalyzed by rapid improvements in [artificial intelligence] tech, the ongoing energy transition and decarbonization, as well as demographic change,” said Rode.
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